Free Mortgage? Not So Fast

Never-mind the free house. A New York State Supreme Court appellate division overturned a year-old decision forgiving a Long Island couple’s mortgage debt.

Last Thanksgiving, we wrote about Suffolk County Judge Jeffrey Spinner’s surprising move to forgive some $525,000 in mortgage payments demanded by OneWest Bank and its IndyMac mortgage division from Greg Horoski and Diane Yano-Horoski.

Judge Spinner canceled the loan because of conduct by OneWest that he deemed “harsh, repugnant, shocking and repulsive” in his ruling, saying that it was “made clear to the Court that plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than [foreclosure].” In addition, Judge Skinner questioned the bank’s estimate of the amount owed by the borrower. (See Investors Reshape IndyMac)

The decision left lenders jittery and undoubtedly had troubled homeowners nationwide wondering if they could score the same deal. But the appellate judges found that Judge Spinner had no authority to render such a judgment and did not give the bank fair notice that the consequence was even on the table, the New York Post reports.

Mr. Horoski told the Post that the decision surprised him.

Tom Maligno, director of public interest at Touro College’s law center, who was not involved with the case, was disappointed. “The way the banks have been dealing with homeowners has not been fair. I wish all courts would take the fairness part of the equation into account more,” he told Newsday.

OneWest maintains it has been fair with homeowners. In an email to Developments, the company said it is “pleased with the appellate court’s ruling to reinstate the note, mortgage and judgment of foreclosure and sale.”